A few days from now, Bush will go to India and reaffirm his newfound love, becoming the only Republican President to visit India after Nixon. Bush and his ‘mouthpieces’ are quite vocal about their need of India – to compete with the EU, to check China, to control unpredictable regimes and to expand the war on terrorism etc. But it is quite interesting to note how India’s consistent positive response to these advances is generally taken as paradoxical, or else simply as succumbing to ‘external’ pressures. However if we take notice of the transformation of Indian capitalism and of the aspirations of the Indian ruling class, we can easily find the reason behind this mutuality.

India has already expanded its interests beyond South Asia and other neighboring economies. It has business assets and interests to secure both in developed and underdeveloped worlds. In fact, Indian capital has been ‘flying’ through legal and illegal routes since 1956 when the Birla group of companies made a large-scale investment establishing a textile mill in Ethiopia. In the late 1970s-early 1980s, the phrase "third world multinationals" was popularized to differentiate them from the first world multinationals. It was generally perceived that unlike the latter, which were motivated by the firms’ internal growth process, third world multinationals were products of demand-side bottlenecks, the statist restrictions on monopolistic and trade practices, other imperfections and distortions created by the state and political forces. This argument is negated by the fact that the companies going abroad where mostly those who had profiteered in the phase of ‘interventionism’. They were firms having "a diverse and established presence at home". As one scholar from that period, Rajiv Lall noted in his study "Multinationals from the Third World: Indian Firms Investing Abroad" (Oxford University Press, 1986): "These firms tend to be part of large industrial houses with a conglomeration of holdings that give them an imposing rule in the Indian market."

However, until 1978, majority equity participation in firms abroad was generally prohibited. Despite this, the Indian firms investing abroad managed to retain management control. After that, the pace of capital export has been unceasingly maintained, with its tremendous unimpeded nature in the post 1991 phase. The post-1991 scenario has rendered new directions to the Indian "export of capital". The State itself has emerged as a leading segment in this trade, concentrating on sectors that allow a smooth process of capital accumulation domestically and internationally–energy and finance, being true to its role of expressing the general conditions of accumulation and devising overall economic strategy.

The energy requirements of India’s economy have been constantly increasing and as a result indigenous corporate oil interests have evolved, which initially were restricted to brokerage in export and import. But as the regulation for the outflow of Indian capital for investment and acquisitions abroad has been eased out, there has been heavy investment to ‘proactively’ secure energy supplies from abroad. Indian oil companies, especially, Oil & Natural Gas Corporation­Videsh Ltd (OVL), are acquiring assets in oilfields in Russia, Latin America, the Middle East and ex-Soviet Central Asian republics. India is particularly using its erstwhile non-aligned image to gain access to the African oil and gas fields – Chad, Niger, Ghana, and Congo in particular. In Sudan, it has already made its largest investment acquiring the assets from a Canadian company, which left Sudan after human rights organizations charged it of committing genocide in Darfur region. On this front, once again, China is India’s main competitor and collaborator, as both have been trying to ‘secure their energy supplies’ in the context of bigger players.

One may point out that these are still public sector endeavors. However, on the contrary, there have been increasing efforts to open up India’s energy market for private investment, and domestically it is already in place now with Reliance Industries Ltd (RIL) and other private corporates expanding themselves in petroleum and power sectors. Further, at the present fluid state of India’s capitalist expansion, the public sector leadership provides a systematic character to the expanding tentacles of Indian capitalism. Because of the specific character of property relations and rent system involved in it, the oil sector is totally different from other industries and requires state-to-state relation for any negotiation to succeed. In the present state of uncertainty in the energy sector internationally, even if India further liberalizes this sector, its international expansion will remain largely a government affair. Further, especially after 1991, state companies in India have been increasingly corporatized, independently competing for the access to finance and capital markets, and strategizing on their own expansion. The corporatist character of the state-owned enterprise brings together several individuals, having interests and aims distinct from the State, who make contributions during the course of development of the enterprise in the capacity of managers and investors. The State is only the initial investor of the enterprise, while its subsequent expansion is dependent on factors internal to it and its presence in the market. Eventually the state’s ‘share’ is effectively reduced, and the enterprise acquires an independent character similar to the private sector. This leads to crises–on the one hand, the state and the managers are frequently in conflict, and on the other, the state control is de-legitimized.

In fact, the crisis is already evident in India. The Indian government and the managers of its Public Sector Undertakings (PSU) are increasingly at loggerheads over risk assessment etc. For example, OVL’s commitment to corporatism and market is coming increasingly in conflict with its political directors. Recently, OVL had successfully bid a 45 percent stake in a Nigerian oil and gas field. It was the only case where it could beat the Chinese. But in the end it had to face, as some OVL officials put, "a huge embarrassment" and "a loss of credibility" because the government turned down its proposal at the very last moment on the ground of it being "risky". This must be understood in the context of the political debate over divestment in the profit making PSUs. It remains a very contentious issue. Moreover, the left support to the present Indian government has moderated the Indian state’s intensive neo-liberalism, scuttling its recent vigor. Therefore, it needs to put stop to the statist expansion in the energy sector by other means, by playing the political game of calling the investments risky, and motivating the private corporate sector to come up. Besides this, a private-public partnership in the energy sector is already in place, domestically with private oil companies like RIL, while internationally with "diasporic" capital like Mittals.

Recently, some analysts have argued that India’s expansionary involvement with oil-producing countries for securing energy supplies itself is risky as these countries are in conflict with the United States over human rights or non-proliferation issues. And the latter will tolerate India’s alliances only to the extent they are trade-focused. A "diasporic" apologist of the Indian submission to the "American Imperium", Economist Deepak Lal (Business Standard, November 15 2005) argued that this risk "could involve not merely putting the "Gurkhas" on the oil field, but in essentially taking over the country". Quite unabashedly, he argues, "If these foreign investments are to be made on a commercial basis by an Indian oil company, it would be best to privatize the state-owned companies and let them then decide whether such investments are in their commercial interest." However, he concedes, "The Indian government could justifiably use its diplomatic clout to help [a private investment project] fructify". Does not this diplomacy include an employment of "gunboats and Gurkhas"?

Besides energy, another sector where the "public" is supposed to be in command in India is the banking sector. Indian banks too have been buying assets in Africa and Asia. Significantly, this expansion is a typical case of what was classically conceptualized as "finance capital"–a merger of banking and industrial interests. These state-run banks have been providing financial resources to overseas Indian projects, both private and public. More importantly, they are involved in giving loans, credit lines and other financial helps to fragile economies for infrastructure building and other industrial projects on the condition that they will employ Indian firms. In other words, the banking sector expansion has been an important vehicle in exporting Indian capitalist interests overseas, and also reclaiming the Indian "diasporic" interests, as they are increasingly using these financial institutions to their advantage. The "public" nature of this expansion gives it a ‘systematicity’, which otherwise would have been lost in the global market. Further, it creates a direct linkage between the Indian state and capital.

However, "most outward FDI goes to the manufacturing sector, especially, pharmaceuticals", and non-financial services that account for as much as 36% (UNCTAD, "India’s outward FDI: a giant awakening?"), and here it is the private sector that reigns. Definitely, whether "public" or "private", they involve imminent "risks". However, these risks can be India’s asset too. On the one hand, the unstable polities in countries hosting these investments legitimize India’s political intervention to secure its economic assets and interests. In the post-9/11 political parlance, this is what is termed as overseas "security interest" of a powerful country. The recognition of this ‘interest’, the ability to legitimize it by manipulating ‘global opinion’ and forming favorable international alliances constitute the criteria for becoming a power.

On the other hand, India’s mastery of ‘unreliable’, and ‘rogue’ polities, and its ability to forge indigenous clients in those polities make it a worthy partner for other global powers whose recent hyper-interventionism has reduced their own ability in this regard. Conflicts in Afghanistan and Iraq have further attested this inability of the US hegemony, at least–political forces against which wars were waged in these countries were erstwhile US allies. These conflicts are symptomatic of the crisis of the US hegemony more than the unipolarity of the post-Cold War era. Unlike the ideology of the "Soviet threat", the post-Cold War ideologies of human rights and non-proliferation could not form the legitimate basis for forging international alliances, since the duplicity of the "global powers" on those same accounts are too apparent. In fact, the orientalist bases of these ideologies have further curtailed the First World’s ability to directly manipulate political forces in the "third world". At this juncture, ‘mediocre’ powers like India could become relevant interfaces between the two worlds, for perpetuating and sustaining global capitalism and its political structure.

Answering some objections

There are two points that can be raised regarding the "export of capital" from India–that it is quantitatively insignificant, and that the biggest host of the Indian export is the United States and other First World countries.

Regarding the first point, the export is not so insignificant, as the ratio of outward to inward Foreign Direct Investment (OFDI/IFDI) is significantly high and increasing, amounting to around 20% in 2005, while in 1997 it was less than 6%. However, even if we concede this point what matters more is the ability and will of a State to defend the rising interests from this insignificant amount–how does this OFDI shape up the character of Indian capital and state, irrespective of its amount? How much it has affected India’s relationship with the Nepalese, Sri Lankan and other neighbouring economies and polities? How much it has defined India’s intrusion in the African economies (like Sudan, Libya, Nigeria)? How much it has helped in evolving India’s aggressive oil interest, especially since OVL has invested in many African and ex-Soviet Central Asian republics’, Vietnamese, even Cuban oilfields? How much it has defined the active Indian interest in the oil price war, in lowering the "differential oil rent" accrued by the oil economies, and hence how much it has shaped the Indian hobnobbing in the Middle Eastern politics, its vote on the IAEA resolution on Iran?

As far as India’s investment in the US, which hosts the largest chunk, is concerned, it makes the Indian economy (like many other economies) dependent on the ups and downs in the American market. Since Indian capital is just one of the many players here, the Indian state’s task as the protector of its capitalist class (Non resident Indian (NRI) or non-NRI) is to provide it an edge in the competition. This makes the Indian state, furthermore, subservient to global coalitions. On the whole, the OFDI brings Indian capital and state in the consortium of global imperialism, which is presently under the police administration of the US (this status of the US is defined economically, politically and historically.